*Europe's climate policy a shame

France, Netherlands key to EU oil sands decision

Ottawa has been lobbying the Europeans for two years for fundamental changes to an EU proposal to label oil sands as being more carbon-intensive than other crude sources -- a tag that would effectively ban oil sands crude, and threaten to snowball to other regions. Britain had clearly indicated it was in Canada's camp, but on Thursday, France and the Netherlands helped derail the proposed regulation by abstaining on the vote, which needed a majority of total votes to pass.

All three countries are home to international oil companies -- Britain's BP PLC, Royal Dutch Shell PLC of the Netherlands, and France's Total SA -- that are expanding operations in the oil sands. The European firms have faced shareholder resolutions urging them to pull out.

With the stalemate at the EU technical committee, European ministers will have to decide on the fate on the fuel-quality directive in June, and Alberta Premier Alison Redford and federal Natural Resources Minister Joe Oliver said they will keep up the lobbying pressure to defeat the current regulations.

The Brussels vote was the latest in a series of setbacks in Europe and North America for proponents of low-carbon fuel regulations that are aimed at reducing greenhouse gas emissions in the transportation sector.

Backed by the oil industry, the federal and Alberta governments have lobbied aggressively on both continents to derail regulatory efforts that would establish financial disincentives to discourage refiners and marketers from using fuel derived from oil sands bitumen in favour of lower-carbon sources of fuel.

In California, where the low-carbon fuel standard was a pioneer, the local industry won a federal court decision in December that ruled the regulation is unconstitutional. The court issued an injunction blocking the regulations' implementation while the state appeals the lower court ruling.

Other states that were considering following California's lead have slowed implementation and, in some cases, indicated they don't intend to proceed.

In Brussels on Thursday, a European Union committee hit a stalemate in deliberations whether to proceed with the fuel-quality directive, forcing a committee of national ministers to take up the matter in the coming months.

Mr. Oliver -- who has lobbied European counterparts on the fuel directive -- said the government does not want the oil sands to be "stigmatized' internationally, which could affect the willingness of other countries to purchase the crude.

"We just don't want that kind of stigmatizing judgment to be made against our oil sands without any scientific basis,' Mr. Oliver said.

The failure to pass the regulation on Thursday was "good news,' the minister said.

"But we don't take anything for granted going to the next step. It's a pretty convoluted process that they have there and so we have to keep sending the message out.'

Premier Redford said the province could also keep up its lobbying effort, saying her government does not oppose an EU fuel-quality directive so long as it treats Alberta oil fairly. She said her government -- along with Ottawa -- has to persuade customers that the province is taking a balanced approach to oil sands development.

"We will continue to strive to excel at environmental stewardship while balancing economic development,' she said.

Dan Woynillowicz, a spokesman for the Pembina Institute, a Calgary-based environmental lobby group, said the game is not over in Europe, since politicians there are sensitive to environmental considerations and committed to reducing greenhouse gas emissions.

Mr. Woynillowicz agreed, however, that the EU standard could be improved and made fairer to oil sands producers by setting emission standards for a broader slate of crude sources, including heavy oil that is closer to bitumen in its emissions profile.

He acknowledged that governments in North America have cooled in their support for climate policies like the low carbon fuel standard, given the economic challenges of the recession. But he said that pressure will arise again, as the impacts of global warming become clear.

"It would be short-sighted for oil sands producers to feel that they shouldn't be preparing for that evolution in the U.S. marketplace,' he said.